[VEEV – Veeva Systems] Beyond CRM

Salesforce.com disrupted enterprise software and then invited others to do the same.  Sometime in the early 2000s, the company exposed its internal development platform – the infrastructure, databases, and APIs used to support salesforce.com – as a service, force.com, that third parties could leverage to build their own apps for faster and cheaper than they could with existing client-server tools.  Disney used force.com to manage character appearances at Disney World, Electronics Arts used it to build an internal recruiting tool.  Coda, a small European ERP vendor, delivered an accounting app on it.  But Veeva is perhaps the most salient example of how far one could leverage salesforce’s PaaS.  The life sciences CRM suite it launched on force.com a decade ago generates $600mn of subscription revenue today. 

Prior to founding Veeva, Peter Gassner was a senior executive who helped develop Salesforce’s PaaS initiative.  He instantiated within life sciences the same disruptive process – replacing legacy client-server configuration with a multi-tenant hosted service – that Salesforce introduced everywhere else.  That Salesforce itself couldn’t just push its CRM into life sciences points to a few peculiarities within Veeva’s chosen vertical.  Enterprises typically use Salesforce Automation software (SFA) to manage sales activities and sifting through a large universe of potential leads. 

But in pharma, the sales rep isn’t so much curating leads and selling drugs as he is educating the doctor and handing out samples.  This process is surrounded by regulations, which makes Veeva as much a compliance tool as a sales automation technology.  Also, life sciences is a narrow niche, with maybe a hundred global pharmaceutical companies commercializing drugs at significant and recurring scale.  Veeva’s Commercial Cloud, which includes its core CRM product plus dozens of related apps, targets an addressable market of just 450k sales reps¹.  I suspect that industry-specific requirements and workflows, combined with relatively small addressable market, either makes life sciences uninteresting for a horizontal, one-size-fits all CRM vendor of Salesforce’s size or better addressed by a specialized vendor that is steeped in the industry and attuned to its idiosyncrasies. 

Just 13 years after launch, Veeva has near monopoly in life sciences CRM, counting 80% of the industry’s sales reps as subscribers.  But even with that dominant share, Veeva’s core CRM is still growing by mid-teens and Commercial Cloud is growing even faster thanks for steady cross-sells across a wide number of applications, the most significant of which include: 

Closed Loop Marketing (CLM), through which field personnel can show tailored videos and interactive presentations on an iPad during in-person visits, with analytics reporting back to the marketing department which content was most effective at capturing a doctor’s attention²;

Approved Email, where sales reps can choose from pre-approved email templates that contain the most updated content from Veeva Vault (more on Vault later) and prevents them from inadvertently sending certain emails to doctors who are blocked from receiving communications about particular drugs;

Align, which lets managers allocate sales reps to certain drugs and geographic territories, and Engage, which is like Zoom for pharma reps.  

These apps make sense together.  Physician data stored in the CRM can be linked to specific pieces of content so that the field rep can show doctors relevant presentations through Veeva CLM.  Through an e-signature in Veeva CLM, the doctor can opt in to communications sent through Approved Emails.

Veeva’s Commercial Cloud is a monster but is not without its challenges.  COVID has habituated doctors to tele-appointments and challenged the necessity of Veeva’s CRM, which was designed for in-person sales.  It’s far more efficient for pharma reps to meet doctors virtually through Engage.  Between the tele-appointments and workflow efficiencies brought on by increasing automation, it seems reasonable to think that the life sciences industry won’t need as many reps in 5-10 years as they do today.  On an earnings call last December, Veeva claimed that new digital solutions would reduce the industry salesforce by 10% “in the coming year”. 

There have been mass layoffs in the past – in 2013 Eli Lilly announced plans to lay off 30% of its US salesforce; in 2006 Pfizer announced it would reduce its US sales force by 20% – but those were caused by the vicissitudes of drug competition whereas recent downsizings feel more structural in nature.  Veeva is making a rep’s job so easy now with remote meetings (Engage) and self-serve content portals that the industry may not need as many sales reps.  Some of the ancillary products being cross-sold into its CRM base can be replicated with horizontal off-the-shelf solutions, but those wouldn’t integrate as well with compliance heavy systems where Veeva already has a stranglehold.  For example, Veeva recently launched a product that lets pharma companies post content on a website portal for doctors to peruse on a self-serve basis.  It’s basically a website.  Except this website pulls approved content from PromoMats (more on this) and delivers content that tailored to customer segments stored in Veeva CRM (which in turn is updated with interactions in the portal).

Another way to add value and retain customers is to join sales automation software to data sources.  Veeva Networks, released in October 2013, is meant to replace the siloed data sources with a master repository that feeds Veeva OpenData – up-to-date information about doctors and other healthcare professionals, thinks like names, phone numbers, addresses, emails, hospital affiliations, and whether their medical licenses are current and which drug samples they are eligible to receive – into Veeva CRM so that pharma reps are always working with the most up-to-date information about their prospects.  Veeva’s CRM customers also draw on third party data from IQVIA, who aggregates the prescription sales data that most of the pharmaceutical industry measures itself against. 

IQVIA strikes me as a well-run but sharp-elbowed monopolist, milking its data asset for all that its worth, attracting the ire of customers and partners, who have sued them at various points over the years.  Sometime in 2016/2017, IQVIA banned pharmaceutical customers from using its data in Veeva Network and Nitro, Veeva’s data warehouse.  Veeva sued IQVIA, alleging anti-trust violations; IQVIA countersued, alleging unlawful use of data.  Both companies have been locked in an acrimonious legal dispute for years.  By restricting its data, IQVIA neutered Network and Nitro, as well as complementary products like Andi, Veeva’s AI application[1], and OpenData.  It’s possible that IQVIA extends the data ban to Veeva’s core CRM (assuming it is legally allowed to), though doing so would mean blowing up relationships with pharma customers, most of whom are reliant on Veeva’s CRM and would probably continue using Veeva’s CRM even without IQVIA’s data.  Still, I wonder if IQVIA might try anyways since: 1/ its merger with Quintiles, a CRO, offers an alternative and increasingly significant use case for its data (more on this in a later post) and 2/ strategically, IQVIA seems intent on owning more parts of the value chain, from drug development to commercialization, which latter includes IQVIA’s own attempts at CRM.